Dear All,
An interview of President ICCI Mr. Yassar Shaki Butt has been published
in Pakistan Observer today that can be accessed by clicking on the link below
http://pakobserver.net/detailnews.asp?id=127935
Please feel free to use it in in toto or in parts. Text of interview is also pasted below
Best regards,
Indirect taxation continues to hurt misfortunate: Yassar Sakhi Butt
Policy rate cut, specific rate for industries to spur growth
Islamabad—President Islamabad Chamber of Commerce and Industry Yassar Sakhi Butt has said FBR, like tax authorities in many Least Developed Countries, derives most of revenue from indirect taxation which is a major burden on poor and a stumbling block in growth.
He said that masses as well as productive sectors continue to pay the price as authorities continue to keep some major sectors exempted from taxes. The situation is keeping country underdeveloped as tax-to-GDP ratio remained unsatisfactory leaving country with no option but to seek foreign assistance to run the affairs.
The ICCI President Yassar Sakhi Butt who is also Executive Director of S.A.S Group having interests in construction, hoteling, trading, renewable energy, medical services and gas services, said that it is highly unlikely that our tax system cannot be improved.
The young business magnate stressed that any tax reform process must deal with the core issues of equity and efficiency.
He said that heavy reliance on indirect taxes, whose incidence on the poor is comparatively greater than on the rich, continues. Many among the fortunate, smart enough to show agriculture as their major source of income, continue to remain exempt from paying income tax.
The country's tax system has fuelled the belief that our tax system is deeply inequitable which has remained a major source of concern for international lenders, said Yassar Sakhi Butt.
He noted that our Gross Domestic Product is forecast to grow at less than 3 per cent for the current year, due to load shedding, high cost of credit, government's reliance on domestic borrowing, eroding currency and law and order issues.
Low growth will have automatic negative impact on tax collections that also casts doubts over the claims of FBR regarding realising enhanced collections, he added.
He said that growing distrust between the people, taxpayers and the authorities can be reduced through serious reforms and a fully disclosed sector wise breakdown of tax collected under each head, he said.
To a question regarding productivity surge, Mr. Butt said that the multiple challenges call for focus on key ingredients in economic growth.
The productivity in Pakistan dropped to 11 per cent during 1998-2008, worst in Asia, which underline the need for efficient, competitive and connected markets.
We should abandon the habit of surviving on borrowed money; currency printing and living beyond means and no one should be allowed to thrive without paying their share in national development. Failure to economise expenditure has kept subcontinent slave for hundreds of years and time has come for us to prepare for a change lest it is too late, he warned.
Mismatched spending targets, dwindling labour productivity, bureaucratic inertia, out-dated management and inefficient work practices as well as many unmanaged projects have drained the economy which can be handled, he said adding that a revival plan can result in a competitive modern economy which has become an urgent requirement after MFN with India, said Yassar Butt.
Dearth of high-end labour force is hampering productivity. Capacity underutilisation is leading to high cost of production and depressed external demand that put Pakistan on obvious disadvantage. The private sector lack will to move towards risk taking and innovating own practices and products is missing which is evident from hue and cry over expected competition with neighbours in the near future, he said.
To a question regarding agricultural revolution in Pakistan, President ICCI said that traditional farming, inefficient irrigation, high input costs, lack of biosafety regulations and insufficient credit for poor farmers is hampering the real potential of the most important sector of economy.
Cost of environment degradation stands at six per cent of the GDP annually while the losses of public sector enterprises are around 1.5 per cent of the GDP, he informed adding that around 20 per cent of the milk production is lost due to poor infrastructure facilities.
Scarcity of funds has an impact on development spending and the private sector remains investment-shy due to lack of an enabling environment.
Yassar Sakhi Butt said that banking spread and high cost of credit are issues choking growth that should be tackled immediately. He hoped that SBP will cut interest rates in the next move to protest masses as well as private sector from the impact of prevailing conditions.
Government can consider allowing special interest rates for different industries which are not living on subsidies, he said.
Internationally competitive interest rate regime is necessary for investments to bear fruit and for encouraging new investors. Investment in different sectors increased while the interest rates were low and decreased with their rise. SBP should lower the interest rates for encouraging investment, demanded Mr. Yassar Sakhi Butt.
--
Munawar Mughal
Chairman, Founder Group, ICCI,
Member Managing Committee, FPCCI,
Former President ICCI,
Former Chairman FPCCI Capital Office,
Ph Off: 051-2253145 & 2250526.
Tariq Khattak, Islamabad, Pakistan.
GSM = 0300-9599007 and 0333-9599007
Email: Tariqgulkhattak@gmail.com
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